Managing Your Money and Bankroll - Part II

Swinging Like a Pendulum: Variance and Volatility

Variance and volatility are an intrinsic part of the gaming experience. They come with the territory, and there's no escaping it.

Gambling is a roller coaster ride. If you gamble, you'll have stunning and almost unbelievable swings in your fortunes at the tables. If you are in a downswing, it is crucial to recognize that these doldrums are an inevitable consequence of any game that's subject to complex statistical principles. These swings can feel unbelievable. "Why me, dear God, why me?" is a common plea uttered in one form or another by almost every gambler – even the atheists – but the fact of the matter is that dramatic swings are not only possible, they are to be expected.

All of the games you find in a casino are highly volatile, and the impact on your bankroll can be substantial. To play seriously, you need a bankroll large enough to withstand these predictable fluctuations, along with a strong enough sense of purpose to withstand the assaults on your karma, self-confidence, psyche, and pride. When everything seems to be conspiring against you, it takes a psychologically strong individual to stand firm in the face of the avalanche.

Keeping Records

Accurate records of wins and losses will help you focus on long-term results – the ones that really matter. In addition, nothing forces you to be honest with yourself more than writing down your results. You need to record the games played, the stakes you played for, how much you won or lost, and the length of time you played, or the races or sporting events you bet.

Doing this – it's simple, really – provides a clear record of your bottom line as it moves through time. After you've recorded a relatively large amount of data, you'll begin to notice that the results of any one particular session – unless you win the lottery and walk away with $15 million or so – are not going to swing your bottom line too far in either direction. If you become very successful, you'll need these records anyway to supply to Uncle Sam along with your taxes.

You can make these records even more detailed if you desire, by keeping separate records for different card games, or keeping your straight bets on horses separate from doubles, exactas, and exotics. The more information you record, the more valuable it is likely to be in analyzing your results.

Keeping accurate records for games in which the house has an immutable edge – such as craps, roulette, baccarat, and slots – can be sobering. It may even inspire you to develop the skills necessary to beat games such as poker, sports betting, and horse racing – the kind you can win at – on a regular basis.

Every gambler, even one who gambles only recreationally and infrequently, needs to know where the money is coming from, or (sigh) going to. Look at the games you play, the size of the wagers you make, the amount you win or lose on an hourly basis, and other factors that you might use to increase your expectation or ensure that your losses are within your means.

When you come right down to it, moving away from the games in which the house edge is fixed and cannot be overcome regardless of what you do and into beatable games, once you've mastered the required skills and discipline, is really the only way one can develop a positive long-term expectation. After all, if you become better at playing games like craps, roulette, baccarat, and the slots, you'll still lose money – not as rapidly, perhaps – as one can never expect to play these games and win in the long run. It's sad, but true. As much fun as craps can be, the casino will still take your money – even when you take all the odds offered and the house edge is less than 1 percent.

Team Play

Now that you know this, what can you do about that blasted roller coaster ride? One thought that has been rattling around in our heads is team play. Team play is found in a number of gambling venues, most commonly blackjack, in which teams usually made up of five or so players, all of whom are expert card counters, combine their bankrolls and share in the spoils. Team play works nicely because the game is algorithmic. That is, there are well-known principles for optimum play, and if all members of the team use them efficiently, each member will be playing with the same positive expectation.

A variation on team play is also found in poker, particularly in tournament play, where each of several contestants "buys" a piece of each other. That way, if one of them has a big payday, the whole team profits. It is not surprising that tournaments would be the place for team play to emerge in poker. Tournament poker is nothing if not wildly variable.

Can team play work in ring games? Maybe, maybe not. There are lots of tricky issues. Here are four burdens we think would need to be overcome in order for a successful poker team to operate:

1. The Sinatra-like "I'll do it my way" ethic that most poker players have would have to be abandoned. Team play can't work unless all members of the team are coordinated in their efforts.

2. Trust is paramount. All members of the team must have complete trust and faith in the integrity of everyone else.

3. There has to be a sufficient number of games in your locale so that you don't end up playing against members of your own team. Team play works best when each player operates independently of the others. This also prevents accusations of collusion in case it becomes known that people are playing as part of a team.

4. Skill levels need to be pretty much the same. This one is really tricky, since judging the skill level of an individual player is not easy. If it turns out that one or two players are "carrying" a team, it is going to challenge the integrity of the team.

These aren't simple issues, and since there hasn't been much experience with team play, we don't know how they might work out. Nevertheless, these notions aren't really radical. They have obvious parallels in the stock market, where virtually every sensible investment strategy is based on diversification. When you diversify and spread your holdings around among a number of different investment instruments, you are really doing nothing more than damping the fluctuation; you are taming the volatility dragon. Who knows, it might work in poker.

Lou Krieger is the author of Poker for Dummies, Hold'em Excellence: From Beginner to Winner, and More Hold'em Excellence: A Winner for Life, available at major bookstores and online outlets everywhere. His next book, Gambling for Dummies, co-authored by Arthur Reber, will be published in October. Arthur S. Reber, Ph.D., wrote The New Gambler's Bible and has also authored many works in the field of psychology, and is a professor of psychology and a devoted poker player. Visit Lou online at www.loukrieger.com.